Gazprom closes on South Stream
goal By Margarita Assenova
Russia is moving rapidly to start building
the South Stream natural gas pipeline before the
end of the year. On October 29, Serbia became the
first Gazprom partner to announce its final
investment decision on the construction of South
Stream. Bulgaria will follow suit on November 9;
Hungary and Slovenia are expected to adopt similar
decisions by November 15.
The flurry of
activities on finalizing South Stream investment
agreements with a number of Central and Eastern
European countries will permit Gazprom to start
construction soon.
After Turkey signed a
deal in December 2011 to let Russia run the
pipeline through Turkish territorial waters in the
Black Sea, the Kremlin seems to be getting closer
to achieving two major political goals: bypassing
Ukraine in future Russian gas supplies
to Europe and getting
ahead of the Nabucco project (or any modification
of it) designed to transport Caspian gas via
Turkey.
Before commissioning its North
Stream pipeline under the Baltic Sea to deliver
gas directly to Germany in November 2011, Russia
was shipping around 80% of its Europe-bound gas
via Ukraine - and the rest via Belarus. In 2011,
Russian gas exports to Europe, including Turkey,
totaled 140 billion cubic meters (bcm). The
combined maximum capacity of the North Stream (55
bcm), South Stream (63 bcm) and Blue Stream
pipeline (delivering 16 bcm Russian gas to Turkey
under the Black Sea) will almost match this
figure, thus changing completely Russia's export
routes.
But for European Union customers,
the diversification of routes does not equal the
diversification of sources. In addition, the
exclusion of Ukraine from international gas
transit corridors will make it more vulnerable to
political pressure and energy blackmail by Moscow.
Gazprom owns 50% of the South Stream
project, Italy's ENI has 20%, and Germany's
Wintershall and Electricite de France (EDF) each
own 15%. Hence, the Russian energy giant is taking
the lead in negotiating separate bilateral
agreements with each state along the South Stream
route.
Gazprom is attempting to retain
full control of the project, a process that has
raised concerns in Brussels. The European Union
Energy Commissioner Guenter Oettinger called a
ministerial meeting on the South Stream project in
Brussels on October 29 with the participation of
officials from Bulgaria, Croatia, Greece, Hungary,
Italy, Slovenia, Austria and Romania. The meeting
revolved around whether the countries through
which the South Stream pipeline would pass will
agree to accept the European Commission's
coordinating efforts.
The EU wants to
ensure that possible bilateral agreements, which
may be signed by certain EU member states, are
fully adjusted to common European legislation, the
EU acquis communautaire (the cumulative body of
European Community laws).
South Stream
Serbia, a Switzerland-registered joint venture
between Gazprom and Serbia's state gas utility
Serbijagas, will invest 1.7 billion euros (US$2.2
billion) in the project. The 470-killometer
Serbian section of the pipeline will start at the
Bulgarian border in the east and exit near
Subotica in the north. It will then continue
through Hungary to Austria, with offshoots to
Croatia and Bosnia-Herzegovina (the Republika
Srpska entity only). Another branch will veer
through Slovenia and reach northern Italy.
The South Stream project may include links
to Macedonia and Montenegro, according to
Serbijagas CEO Dusan Bajatovic, who spoke at a
press conference in Belgrade after signing the
definitive agreement with Gazprom. However,
neither Bajatovic nor his Gazprom counterpart
Leonid Chugunov mentioned the possibility of
connecting Kosovo or Albania to the grid. Both
countries have so far been excluded from the
Gazprom-sponsored Balkan network. This is not
surprising given Belgrade's refusal to recognize
Kosovo and Moscow's propensity for accommodating
its loyalists.
The new Serbian President
Tomislav Nikolic, a vocal advocate of improved
relations with Russia, went to Sochi in September
to meet with Russian President Vladimir Putin and
announce that the construction of Serbia's South
Stream section will begin in December 2012.
Unlike other bilateral agreements in the
Balkans, where the shareholders have 50/50
ownership of the joint companies, Serbijagas has
agreed to a 49% share while Gazprom has 51%. This
may become a problem when Serbia joins the
European Union, because a non-EU member state will
be the majority owner of a critical energy
corridor on EU territory.
Gazprom does not
seem to be currently pushing for the initially
planned southern branch of South Stream, which was
supposed to run from Bulgaria through Greece to
southern Italy. The Russian energy giant seems to
be focused on meeting its self-imposed deadline to
start building the main route from the Black Sea
city of Varna to Vienna in December.
Moscow is in a hurry to start constructing
the pipeline before the EU's Third Energy Package
becomes effective in March 2013. The new
regulations would require providing access by
other EU suppliers to pipelines built by third
countries, such as Russia.
However,
European Commission sources have said that
attempts to accelerate the South Stream project
will not circumvent EU antitrust and environmental
obligations. Commission officials told EurActiv
that the electricity and gas directives, the two
key pieces of the package, had to be transposed by
EU countries by March 3, 2011, and were therefore
already considered to be in force.
In
fact, the European Commission believes that
Bulgaria and Romania are still not fully in line
with EU gas market rules and took the two
countries to the EU Court of Justice in November
2011.
Although not openly opposing South
Stream, the EU's priority remains the Nabucco
natural gas pipeline (or its re-embodiment, the
Southern Gas Corridor) from the Caspian Sea via
Turkey to Europe. According to a recently leaked
report by the European Commission, Bulgaria must
commit more thoroughly to the development of the
EU-supported Southern Gas Corridor aimed at
diversifying natural gas supplies to Europe.
Bulgaria will be the second state formally
committed to South Stream. On November 9,
Gazprom's Deputy Chairman Alexei Miller will
arrive in Sofia to sign the final investment
agreement with Mihail Andonov, executive director
of Bulgarian Energy Holding. Russia's President
Vladimir Putin will not be present at the
ceremony, as he has postponed his visit to Sofia
until December, according to the Bulgarian Foreign
Ministry.
Margarita Assenova is
a professional journalist and political analyst
with over 25 years of experience in print and
broadcast media, including Radio Free Europe/
Radio Liberty. In 1997 she was awarded the John
Knight Professional Journalism Fellowship at
Stanford University for her reporting on
nationalism in the Balkans. She currently serves
as the Course Chair (Contractor) for Southeast
Central Europe Advanced Area Studies at the
Foreign Service Institute of the US Department of
State.
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